October 13th, 2023 - This Week in Alternative Investments

Startups have been increasingly turning to equity crowdfunding over the past five years


Bite sized market updates

Startups have been turning to equity crowdfunding. As venture capital funding drops to its lowest level in six years.

Mortgage rates have reached their highest point since 2000. At nearly 7.5%, the average rate has risen 150% in two years.

Private credit funds are taking over corporate lending. They now control around a third of the market, just two years after controlling less than a quarter.

A painting originally valued at $15,000 could sell for $18 million. The 17th century work has now been attributed to Rembrandt after a year and a half of research.


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Market Updates

Equity crowdfunding has increased dramatically in the past five years. Meanwhile, in Q3, venture capital funding fell to its lowest level in six years, with the lowest total deal count in three years. As the VC market has become harder to access, more companies are turning to crowdfunding. There were 449 deals in the first half of 2023, down from 2022, but on par with 2021, and over twice as many as in 2018. This is due in part to the 2020 decision by the SEC to raise the annual crowdfunding cap from $1 million to $5 million. As opposed to traditional VC, most crowdfunding platforms are available to everyday investors, giving them the ability to invest in startups.

The average 30-year fixed mortgage rate hit a 23-year high. According to Freddie Mac, rates reached 7.49%, the highest since November 2000. It’s hard to believe, but just two years ago, that number was 2.99%, and the rise since then is largely responsible for the stagnant real estate market. Higher mortgage payments leads to less demand from buyers, and homeowners locked into low rates are less inclined to sell, leading to less supply. With the Fed continuing to keep rates high to fight inflation, it might be awhile before rates start to drop - the last time rates were this high, it took around two and a half years to drop back down to 5%.

Private credit funds now account for a third of the corporate lending market. With interest rates increasing and bank standards tightening, hedge funds and private equity firms are stepping into the funding gap. Collectively, they now hold $1.47 trillion in assets under management (AUM) compared to the $2.81 trillion that banks hold in corporate loans, with an average yield 2.39% higher. The three biggest players in the market - Apollo, Ares and Blackstone - have all seen their AUM more than triple in the last five years.

A painting now attributed to Rembrandt could sell for $18 million after originally being valued at $15,000. Painted in the 1620s, “The Adoration of Kings” was originally attributed to the “Circle of Rembrandt”, meaning a friend or student of the Dutch master. It was bought for $908,000 two years ago at Christie’s despite the low estimate, as the buyer clearly suspected its value was higher. Now, after an 18-month research project undertaken by Sotheby’s, it has been identified as an original Rembrandt and will come up for auction this December.


Research and Insights from the Vincent team

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